You are here

Greece 'No' in referendum sends euro into tailspin

Mon, Jul 06, 2015 - 4:00 AM

[ATHENS] Greece's government on Sunday looked to have won a 'No' it had been seeking in a referendum on bailout terms, but the euro immediately plummeted on fears the result could splinter the eurozone.

An official tally of over half the ballots cast showed a resounding 61 per cent of Greek voters had backed the government's 'No' in the plebiscite.

Senior eurozone officials were to hold talks on Monday to discuss the result, a European source told AFP.

France's President Francois Hollande and German Chancellor Angela Merkel were to meet in Paris the same day to assess the result, the French presidency said. Hollande also spoke with Greek Prime Minister Alexis Tsipras by telephone late Sunday.

Market voices on:

Ms Merkel's deputy chancellor, German Economy Minister Sigmar Gabriel, said Greek Prime Minister Alexis Tsipras had "torn down bridges" between his country and Europe with the vote.

New negotiations on a bailout were now "difficult to imagine," he told the Tagesspiegel newspaper.

The euro crashed 1.6 per cent in the wake of the referendum, to US$1.0963, in electronic trading before Asian markets opened.

Several EU leaders had said a 'No' vote could see an end to further bailout negotiations, forcing Greece to leave the 19-nation eurozone - and possibly even the European Union - in a "Grexit".

But Athens insisted the result meant it was better placed now to demand its international creditors - the European Commission, European Central Bank (ECB) and the International Monetary Fund (IMF) - drop harsh austerity demands and accept a restructuring of its debt.

"With this result, the prime minister has a clear mandate from the Greek people," government spokesman Gabriel Sakellaridis said on television.

"Initiatives will intensify from this evening (Sunday) onward so that there can be a deal" on a new bailout, he said.

He added that the Bank of Greece was immediately asking the European Central Bank to inject emergency euro cash for Greece's depleted banks, which have been shuttered all week because of capital controls.

Defence Minister Panos Kammenos, who also leads the junior coalition party in Prime Minister Alexis Tsipras's leftwing government, said in a tweet that the Greeks "proved they don't bow to blackmail, to threats".

Cheering crowd

A growing crowd of 6,000 gathered in central Athens late Sunday to celebrate the 'No' vote. The scene was festive, with cheering and smiling Greeks shouting "Oxi" (No) and hugging each other.

"I believe in Tsipras and in this government," said George Stasinopoulos, 25. "The governments in Europe don't support us but their people do and this gives us courage." He said he believed the result would secure "a better future for me and my children".

Mr Tsipras, who had staked his political career on the outcome, had said as he cast his own ballot in Athens that "no one can ignore the will of the people to live, to live with determination, to take its destiny into its own hands".

However, in other streets in the capital, some voters who had cast 'No' ballots said they had been confronted with an impossible choice.

One of them, Nika Spenzes, 33 and unemployed, said: "I'm not happy - we cannot be happy as a nation with this unemployment and poverty. And a 'No' victory doesn't mean there's any more hope for Greece than before." Even 'Yes' voters were ambivalent about their camp's apparent defeat.

Paris, a 41-year-old dentist who had voted 'Yes', said: "I cannot honestly say I'm sad if the Nos have won because there's no real hope either way."

Banks need cash

Greece's most pressing problem, was to ease capital controls Mr Tsipras's government ordered to stem a bank run that had been rapidly draining bank deposits.

The measure, implemented after his announcement a week ago that he had suspended bailout talks to hold the referendum, has limited ATM card holders to daily withdrawals of just 60 euros (US$67) a day.

Panic at that step, and at fears of Grexit, also prompted citizens to stock up on non-perishable food, medicine and imported goods, clearing out supermarket shelves.

The Greek banks' liquidity was expected to dry up entirely within a day or two unless the ECB - a major creditor - injected funds quickly through the Emergency Liquidity Assistance (ELA) mechanism.

The Euro Working Group, which comprises top treasury officials who prepare meetings for the Eurogroup of finance ministers from the 19-country currency union, will hold a meeting Monday to discuss the referendum.

Martin Schulz, the head of the European Parliament, though scathing of Tsipras's actions, told Germany's Welt am Sonntag newspaper that Europe could give short-term emergency loans to Greece "so that public service can be maintained and needy people get the money they need to survive".

Greece was officially declared in default on Friday by the European Financial Stability Facility, which holds 144.6 billion euros (US$160 billion) of Greek loans, after Athens missed an IMF repayment.

Mr Tsipras has called for the ECB, IMF and European Commission forgive 30 percent of the 240 billion euros (US$267 billion) they have loaned Greece over the past five years, and allow it a 20-year grace period before it starts repaying the rest.